401(k)

A qualified employer retirement plan to which eligible employees may make salary deferral contributions on either a pre or post-tax basis. 401(k) rules apply.

commentary

The 401(k) has been perhaps the most impactful account type ever developed. The combination of the automatic payroll deduction which increases the persistance of contributions; the high contribution limits, potential matching contributions and the tax advantages are a tremendous combination. The decision to begin to contribute to a 401(k) at a young age, and the periodic increases in contributions to the maximum allowed as soon as possible is among the most important of decisions an investor can make.